The economic reforms of 1991 and the high-tech boom that followed was an overture to a new era in India. Overnight, new avenues for prosperity and social mobility opened up to the common man. “License raj” gave way to a more open economy and foreign investment encouraged by economic growth and consumerism became one of the key drivers of the Indian economy.
The turn of the century also marked the rise of the Indian entrepreneur, often portrayed as young, scrappy, with fire in their bellies; yearning for full participation in the global economy. With nearly 5000 tech startups in 2016 and an average of 800 new start-ups being set up annually, there is no doubt that India is among the fastest growing start-up ecosystem in the world. NASSCOM estimates that there will be approximately 11,500 startups employing over 250,000 people in India by 2020.
However, it’s not all sunshine and butterflies in the world of Indian start-ups. Start-up ecosystem in India leaves a lot to be desired in terms of breakthrough innovation. With uncertainty in early stage funding, valuations and devaluations, and emergence of new sectors, India is at a very crucial juncture, chalking out its own growth trajectory.
For investors and accelerators, evaluating startups remains one of the biggest challenges. With all the excitement surrounding the election of a new business friendly administration, 2014 and 2015 witnessed heavy flow of big ticket investments. It didn’t take long before investors started realizing that betting on just hope wasn’t particularly healthy.
Consequently, 2016 was the year of introspection and calibration as venture capital investors started seeing significant corrections in the valuations of their portfolio companies. Mismatch in expectations versus execution, difficulties in incorporation, immature regulatory framework coupled with poor market conditions led to major investors that include New York’s Tiger Global Management and Japan’s soft bank scaling back in India.
For startups to graduate to scale-ups, there is a very clear need for the establishment of a robust support mechanism to minimize such bottlenecks; and such a mechanism can only be facilitated by a proactive policy environment distinct from the ad hoc and reactive approach that continues to prevail across the country. The time is ripe for all the stakeholders in the Indian start-up ecosystem to come together, to make their voice heard and to ensure evidence-based solutions to address bottlenecks translates into policy.
Author: Mathew John Ambolil
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